General Information:
 

Symmetrical triangle tops are neutral biased patterns that are characterized by a series of at least two lower highs along with a series of at least two higher lows that converge towards a point. The series of lows and highs can be connected with two trendlines that intersect to form a point or apex, with both the upward sloping and downward sloping lines having similar slopes. A coil is a spring that holds a large amount of energy that can be released all at once, hence Symmetrical Triangles are somtimes called coils because of their shape and tendendcy to produce large percentage price movements in a short period of time.
 

The volume tends to decrease during the formation of the pattern. A generic price target can be calculated by subtracting the lowest low from the highest high and subtracting or adding this value to the apex or point of the triangle. Symmetrical Triangles are more reliable if they do not breakout at the apex, but do so roughly 3/4 of the way through the pattern, this is supported by the statistics below. Symmetrical Triangles that go all the way to the apex tend to have a high failure rate and and little of a coil effect.
 

Below is a table of statistical information from the book Encyclopedia of Chart Patterns by Thomas N. Bulkowski - Publisher: John Wiley & Sons


 

Statistics: based on a population of 162 upside breakout examples and 92 downside breakouts in 500 stocks from 1991 - 1996.


 

Some general stats for Symmetrical Triangles that breakout to the upside.

STATISTICAL DESCRIPTION
UPSIDE BREAKOUT STATISTICAL %
Failure rate
5%
Average rise after the breakout
37%
Most likely rise after downside breakout
20%
Average % that meet price target by height measurement
89%
Average % that pulled back after the breakout
58%
Average breakout distance to apex
78%
Premature breakouts
14%

 


 

Some general stats for Symmetrical Triangles that break to the downside.

STATISTICAL DESCRIPTION
UPSIDE BREAKOUT STATISTICAL %
Failure rate
6%
Failure decline after the breakout
20%
Most likely decline after downside breakout
15%
Average % that meet price target by height measurement
62%
Average % that pulled back after the breakout
59%
Average breakout distance to apex
79%
Premature breakouts
19%
 


 

Chart Examples
 

Now that you understand something about descending triangles, it's time for some real chart examples. Please note that I will be adding more examples as I find them.


 

Above is chart of Gold metal that exibits a nearly perfect textbook example of a Symmetrical Triangle in an uptrend that breaks out to the upside. Notice the substantial price movement after the breakout - like a coil spring that has been broken.


 

NLY above is another great example of a Symmetrical Triangle, notice how symmetrical the converging lines are. Symmetrical Triangles can break have false breakouts to either the upside or the downside. NLY breaches to the downside shortly before the breakout and formes a hammer candlestick that was the last low before the breakout. Again, false breakouts can occur in these triangles, so be on the lookout for them.

Upon breakout for NLY, the volume increases marketedly and a substantial price run-up occurs.

However, note that after the large price run-up, Negative Divergence occurs on the second higher high and ends the rally. Always look for Negative Divergence after a large price run-up or when a higher high occurs as a signal to exit the long position.


 

SLGLF above formed a very pretty Symmetrical Triangle above that broke out on expanding volume. SLGLF is a gold stock which compliments the GOLD's Symmetrical Triangle pattern above. Therefore, if you notice a sector or index forming a particular stock pattern, look for various stocks within that sector to also form similar stock patterns.